Gentlemen At The Gate

“Barbarians” Henry Kravis and George Roberts were the 1980s poster boys for slash-and-burn leveraged buyouts. Now, with trillions pouring into private equity, KKR and its peers have little choice but to build up rather than break up.

- Antoine Gara

For most of this decade, the saga of Gardner Denver, a Milwaukee-based manufacturer of industrial machinery since 1859, has played out like another sequel to Oliver Stone’s iconic 1987 movie, Wall Street. Sales from its oil pumps and compressors slumped, its shares on the New York Stock Exchange languished, and in 2012 opportunistic financiers, now in the form of a hedge fund, pounded the table for change. Eventually management was shuffled, Goldman Sachs oversaw a sale, and a giant New York City buyout firm emerged as the winning bidder in 2013, paying some $3.9 billion, including $2.8 billion in new debt.

But a funny thing happened on the way to the cliché of shuttered plants, downsized employees and pawned off assets. More than $325 million was invested to update equipment, make plants safer and improve operations. New funding allowed the company to expand into the medical and environmental sectors. Its 6,400-person workforce increased by 5%, revenues rose by 15% and operating cash flow surged by 54%. When Gardner Denver returned to the NYSE nearly two years ago, every employee at the company was given stock equal to 40% of annual base pay, $100 million in all. “If we do better, the company does better, which means the shares grow,” says Josh Shelle, a 29-year-old assembly line supervisor at Gardner Denver. “Everybody wins.”